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Finding Value in the VBC Model. How TriHealth's CFO Says They Got It Done

Analysis  |  By Amanda Schiavo  
   August 17, 2022

Moving to a value-based care model from fee-for-service doesn't mean hospitals will be financially successful right away, but it's a journey CFO Andrew DeVoe says will eventually pay off.

When TriHealth, a Cincinnati-based health system with $2.5 billion in net patient revenue, needed to find a way to expand its population health capabilities so it could provide better care to its patients and maintain a stable balance sheet, leaders at the organization realized switching to a value-based care model was the way to go.

TriHealth partnered with a third-party vendor that helps deliver value-based care services, and as a result, the health system achieved notable clinical and financial outcomes across a variety of payer contracts. TriHealth saw a change in revenue with a 70% rise in ambulatory settings and 30% in acute settings. The health system also grew its primary care access by 25% across more than 230 primary care physicians and advanced practitioners. TriHealth says it now ranks near the top decile in cost and utilization as the top-performing ACO nationwide. with a larger payer—$7 million-plus in shared savings.

TriHealth CFO Andrew DeVoe recently connected with HealthLeaders to discuss the system's move to a value-based care model, the success it has seen so far, and the ever-evolving role of healthcare CFOs.

HealthLeaders: How has the shift to value-based care impacted TriHealth's overall financial well-being?

Andrew DeVoe: We're in a transition, and we have been in transition for probably the last 10 years—I started six years ago. We're incredibly focused on ambulatory access, ambulatory facilities, sites of service, and how we can deliver care in the most convenient manner possible. Over the last five or six years, what we've done is developed the infrastructure related to care management capabilities and other aspects of care management to help push us along that value-based curve.

We've had partial [financial] success so far. We generate between $40 million and $50 million in excess revenues per year, which is directly tied to our value-based efforts—so that is substantial. One of the things that have helped substantially is positioning TriHealth from a balance sheet perspective, and from a financial perspective, to accommodate the dip in fee-for-service revenues as we transition to that value-based care.

HL: How can hospitals and health systems deliver high-quality care, without sacrificing their balance sheet?

DeVoe: What we have done is purpose-driven. We've prepared ourselves for diversifying our margin stream. We've entered many ventures; we have half a dozen robust joint ventures with independent providers [in areas of care] where we might not have the best practice yet. We recognize these providers have the highest quality, the best outcomes, and the most efficient means of delivering care. We've also done that with other sites, and support organizations for the business.

In 2019, which is the last free COVID-19 year that we had, 40% of our bottom line came from investment returns related to these joint ventures, not our fee-for-service revenue generation engine. We have the cheapest alternative to refer patients to a more cost-efficient, better outcome, lower-cost care environment. It's kind of a win-win. We win money because of the joint venture; we share profits with them, and we also win because we're lowering our cost of care.

HL: What would you say are the biggest challenges facing healthcare CFOs today?

DeVoe: The single biggest challenge is intentionally walking away from HOPD reimbursement and moving to ASC, which is a 40% to 50% payment cut, but it is something that certainly the patients want, and it helps lower the cost of healthcare.

If you are getting $10,000 for one case and $4,000 for another, and your costs are $4,500 and you're in an ASC, [the hospital] is losing money, but in an HOPD you're making a lot of money, so it's a hard transition. It's one that we haven't completely done, but we've started that journey. The bet is that you're going to make more money on the value side than you're losing on the fee-for-service side.

The other challenge is if you were spending $4,500 on a generic case, and you're only getting paid $4,000, you've got to make sure you get your cost down to at least $3,000. So at least you're making something in contributing to your overhead with $4,000 in reimbursement. It forces you to become more efficient.

HL: How would you say the role of the healthcare CFO has evolved over the last few years?

DeVoe: I've been in this game for 30-plus years, and I've spent most of that time as a CFO—I've been a CEO several times. I think more and more the CFO needs to get away from the financial acumen and focus more importantly on the strategy. The CFO understands the makeup [of the hospital] and the balance sheet better than anybody who could best recommend and best advise on what can either strengthen or weaken the balance sheet. Now, of course, it's not all about the balance sheet. We have a mission, and our mission is to take care of our community. But I think one of the ways you take care of the community is making sure you have an asset that is there in perpetuity and can continue to support the community, which is what we're trying to do here at TriHealth.

Amanda Schiavo is the Finance Editor for HealthLeaders.

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